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Tips for your new retirement income

July 11, 2013

Did you retire in 2013? While filing your first income tax return as a pensioner is likely not at the forefront of your thoughts, there are factors of your new retirement income that you should consider now, to avoid any shocks come tax time.

When you file your 2013 return you'll have a combination of employment income and retirement income. Some of you may have retirement gratuities to take into consideration too. Here are three tips we've got to avoid any major shocks when it comes time to file.

Gratuity payments. These lump sum payments from your employer are considered taxable income, unless you transfer it into a Registered Retirement Plan (RSP). If you decide to keep the cash, or even a portion of the payment as cash, be sure to budget for the taxes that will be owed on it.

Income splitting. You can't split your employment income or income from a retirement compensation arrangement (RCA), but you can split any income from a registered pension plan, like Teachers', when you fill out your income tax form. If one spouse has a higher retirement income than the other, splitting this portion of your income may help to reduce the amount of tax owed by your household. Consult a financial adviser to learn what the optimal split would be, as it's not always 50/50.

Deducting more from the source. If you have other sources of retirement income, like CPP, OAS or income from re-employment, you may find yourself facing a bill come tax time. To avoid this, you can increase the amount of tax deducted at source from your pension. Log in to iAccess Web, and click "Change my income tax deduction" on the Pension Payments page. Some people even opt for higher deductions at source as a form of forced savings, ensuring they end up with a refund when they file.